¹Institute for International Economics, 1750 Mass. Ave. NW, Washington, DC 20036, USA. E-mail: mnoland@iie.com

Abstract

During the 1990s, a famine in North Korea killed perhaps 3–5 per cent of the population. In the context of this trauma, the state's inability to fulfill its normal obligations instigated an unmanaged yet rational process of coping and adjustment under duress by enterprises, households, and local institutions. Policy reversals in the fall of 2005 may reflect an attempt by central authorities to reverse this transition process and may intensify distress in the future. This model of transition – driven essentially by state failure – may become increasingly prominent in the future.